Rackspace Technology, Inc.

Good afternoon, everyone, and welcome to the Rackspace Technologies first quarter earnings conference call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star and one. To remove yourself from the question queue, you may press star and two. As a note, today's event is being recorded. At this time, I'd like to turn the conference call over to Joe Crivelli, Vice President of Investor Relations.

Sir, you may begin. Good afternoon, and welcome to Rackspace Technologies' first quarter 2021 earnings conference call. Kevin Jones, our Chief Executive Officer, and Amar Malatira, our President and Chief Financial Officer, join us today. The slide deck we will refer to today can be found on our Investor Relations website. On slide two, certain comments we make on this call will be forward-looking. These statements are subject to risks and uncertainties which would cause actual results to differ. A discussion of these risks and uncertainties is included in our SEC filings. RAC space technology assumes no obligation to update the information presented on the call except as required by law. Our presentation includes certain non-GAAP financial measures and certain further adjustments to these measures which we believe provide useful information to our investors. In accordance with SEC rules, we've provided a reconciliation of these measures to their respective and most directly comparable gap measures. These reconciliations are in the tables included in our earnings release and slide presentation, both of which are available on our website. After our prepared remarks, we will take your questions. I'll now turn the call over to Kevin.

Good afternoon, and thanks for joining us to discuss our first quarter financial results. 2021 is off to a great start, and we are excited to share the results with you. Today, I'll discuss quarterly highlights and provide additional perspective on some recent product launches that we believe position Rackspace technology exactly where the market is moving. As I've done in past quarters, also touch on some case studies of customers who are doing truly innovative things with cloud technology. Then our president and chief financial officer, Amar Malatira, will go into detail on the financial results before I make some concluding remarks. Slide five shows the main messages we would like to deliver today. First quarter was very strong for Rackspace technology, and we exceeded the guidance targets we set in late February with record revenue and very strong earnings growth. The tectonic shift to multi-cloud, as well as the success We had onboarding new logos in 2019 and 2020 are expected to fuel double digit revenue growth throughout 2021 and beyond. You've heard me say that 2021 is going to be the most exciting year for new product launches in the history of the company. And in the first quarter, we launched Rackspace Elastic Engineering and Rackspace Services for VMware Cloud, which had been extremely well received by industry analysts and customers. I'll talk more about these in a moment. The work that our finance team has done to improve cash flow drove a significant turnaround in the first quarter with strong growth in operating cash flow. Amar will discuss this in his section. It also bears repeating that our first quarter debt refinancing put us in a position of strength from a balance sheet perspective for years to come. As we've noted previously, we now have no significant debt maturities for the next seven years. And in addition, our debt was booked at historically low interest rates. In fact, the $550 million financing that we completed in February was the best pricing ever for a non-investment grade senior secured notes offering. Turn into slide six. We posted another record quarter with revenue up 11% compared to the first quarter of 2020 to $726 million. Core revenue growth was even stronger, up 15% year-over-year to $677 million. This strong growth was driven by continued momentum in our multi-cloud business. We are winning new customer engagements and expanding share of wallet with the customers we onboarded in late 2019 and throughout 2020. As a result, we believe we are expanding market share in cloud IT services. Earnings leverage continues to be excellent, Non-GAAP operating profit was $119 million, and non-GAAP earnings per share was 23 cents, up 10% and 44% respectively compared to last year's first quarter. And we see opportunity for additional earnings leverage. Amar, now in a six-month, has taken a fresh look at everything we do. As a result, we have driven a number of changes in our decision-making process and management systems. To give you a few examples, we revamped the way we analyze deal profitability and decide which deals to pursue. This, in turn, has informed how we structure our sales force and which product lines we lean into for growth. We have reexamined our expense structure and uncovered additional efficiencies that we can drive in 2021 and beyond, and identified areas where we can invest these savings to accelerate the trajectory of our top line. Additional discipline and working capital management has led to a significant turnaround in cash flow. Amar will provide more details in a moment. And we continue to improve our investor reporting and give the investment community more insight into our growth drivers and value creation strategies. New sales bookings in the first quarter were $244 million, up 6% compared to the first quarter of 2020. This was a solid bookings quarter. The year-over-year bookings growth was lower than in past quarters for a number of reasons. Firstly, we are lapping our own efforts and are up against tough compares from a bookings growth standpoint. This will continue throughout the year as we landed a number of marquee multi-cloud deals, including the State of Texas deal in the second quarter of last year. So while we expect continued strong bookings in 2021, the year-over-year compares will be more modest. we remain confident in our revenue guidance for fiscal 2021 and expect double digit revenue growth for the year. Secondly, we are focused on driving the right mix of business and increasing the initial margin we are willing to accept on new deals. This is a benefit of the booking success we've had as we now have a significant install base of enterprise accounts that will serve as a foundation for our growth. Thirdly, We adjusted sales incentives and realigned our sales force to prioritize high value deals in line with our land and expand strategy. As these changes have taken root, we are encouraged that bookings accelerated and grew sequentially each successive month of the year. Slide seven shows how we're evolving the strategy of the company. We have gotten encouraging signals from customers that they see us as the opposite of the global systems integrators or GSIs, This is because we bring the benefits of a GSI, including size and scale, but unlike the GSIs, we're also cloud-focused, disruptive, flexible, fast, agile, and we have our fanatical customer experience. So we are staking our claim as the un-GSI. We believe this makes a clear statement with customers and prospects about who we are and the competitive advantages we bring to the table. On slide eight, Our positioning as the un-GSI as well as market trends have influenced our product development efforts. As a result, we recently introduced two new offerings that we believe hit the sweet spot in the market. Many of you participated in our webinar on Rackspace Elastic Engineering in April, and that service offering has garnered significant early interest from customers around the world. Last week, we introduced Rackspace Services for VMware Cloud, as VMware is in many cases the platform of choice for private cloud workloads. Looking forward, we believe VMware is an important fourth cloud platform alongside AWS, Azure, and Google Cloud. On slide nine, Rackspace Elastic Engineering is the next iteration of our service blocks. We are very excited about this new offering and believe it is exactly what the market needs to move cloud adoption to the next level. Rackspace Elastic Engineering is on-demand access to a pod of multidisciplinary cloud specialists who will know the customer's application, team, and desired business objectives and will be laser-focused on driving their cloud outcomes. The pod will work seamlessly with the customer's internal DevOps teams, essentially becoming a trusted part of their permanent cloud team. The pod is capable of delivering a broad spectrum of outcomes without the constraints of a fixed scope of management. This is a complete opposite of how a GSI structures and prices their services. Rackspace Elastic Engineering is already available and fully supported across AWS, Azure, Google Cloud, and VMware. This really cracks the code for customers who are trapped between running their traditional operations and evolving to be more cloud native and modern. After just a few weeks, Elastic Engineering has been one of the most successful new product launches in Rackspace history. We've already closed significant deals in all three regions of the world, and the pipeline for this offering is growing very fast. On slide 10, last week we announced our rebranded private cloud offering, Rackspace Services for VMware Cloud. In conversations with customers, it became clear that they needed a solution that provided a public cloud experience with private cloud security, data sovereignty, low latency, and pricing flexibility. We are excited about this offering and view it as a way to significantly increase growth in private cloud and further extend our lead in multi-cloud. In addition, this offering aligns to our CapEx Lite business model. And in the early going, it is clear that customers were hungry for this kind of architecture as we are off to a great early start with this offering as well. As I've done in past quarters, I'd like to highlight some customers who are doing truly innovative things in the cloud. On slide 11, let's talk about Porsche, which is a signature enterprise cloud customer for Rackspace technology. As you can imagine, automobile manufacturing is a complex undertaking in a complex industry and it requires best-of-breed systems and tools across a variety of IT environments to execute at the very highest level like Porsche does. So Porsche is in many ways a textbook case study for multi-cloud, as the company leverages all three hyperscalers, AWS, Microsoft Azure, and Google Cloud for its cloud environment. Accordingly, we are very proud to have been selected as Porsche's cloud partner of choice to help this world-renowned automaker harmonize and govern its multi-cloud platform. On slide 12, Autodesk subsidiary Innovize is one of the preeminent software companies for the water industry. The company knew that it needed to be on the technological forefront to continue to lead its industry. They had to modernize their solution, which was a desktop app with on-premise client servers. While the company had highly skilled SaaS engineers and machine learning and DevOps teams, they did not have the resources to meet an aggressive timeline. Pivoting from a desktop-centric product suite to a SaaS solution would require all hands on deck. They needed to bolster their teams with equally skilled engineers. With Rackspace Technologies' help, they built and introduced Info360, a SaaS offering based on AWS, which also included advanced IoT analytics using real-time data. The new platform was built with serverless technology, and microservices enabled their customers to transfer their asset network information to the cloud. It also leveraged geospatial mapping functionalities, which were previously available only with additional third-party software. I'm so proud of the Rackers who helped Innovize meet its aggressive timelines, so that it could maintain its lead in the industry. Now, Ammar, we'll take you through our financial results in more detail, then I'll make some concluding remarks before we open for Q&A. Ammar?